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Managing relationships in mining communities

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World Coal,

Managing is an interesting word. It implies a rather one-way relationship. Consultation is perhaps better and must run like a thread through the life of a coal mining project. But engagement is really what it is all about – involving all the right stakeholders from the outset to make sure of their support in achieving optimum results. Co-ownership of the project with the local community would be an even more aspirational aim.

All good mining companies know this. They want to do the right thing and understand only too well the financial, operational and reputational risks of getting it wrong.

In most western economies, good community relations are necessary simply to secure planning and permitting, thereby avoiding an upswell of public opposition. In emerging economies, however, where transparency may be lower, poor community relations can quickly lead to business interruption, withheld funding, unexpected costs, derailed plans for future growth, legal challenges, strike action and spiralling negative media reporting. With the advent of social media, irreparable reputational damage can be inflicted almost overnight.

Yet all this is to look at things only from the mining company’s point of view. What about the perspective of the local communities that are affected for good or for bad by coal mining operations? After all, mining is carried out in some of the most under-developed places in the world that are home to large numbers of vulnerable people. A new mine will inevitably attract those who may see it as preferable to traditional subsistence. People may come from far away to set up small shops or businesses, find employment or contract work or sometimes offer less palatable services. The unwelcome results can include disease, accidents, pollution and dependency – huge risks both for local people and for the mining company that is temporarily sharing their territory.

So what does best practice in the area of community relations look like? A good start is to gain an in-depth understanding of the socio-economics of the local community. If communities depend on the protection of forestry, for example, the ill-considered felling of trees to clear space for the mine could be the worst possible start.

Another useful early step is to engage specialists with the right expertise in management systems and CSR as soon as possible, ideally at the exploration stage when there is still a blank canvas on which to work. The ultimate objective is to gain the social licence to operate – a term widely used but little understood. It relates to the ongoing approval of the local community and other stakeholders: a broad social acceptance. It is rooted in beliefs, perceptions and opinions; it is intangible, dynamic and temporary – and it must be earned and then maintained.

Stakeholder mapping is a technique that is often used to help understand communities. It is a powerful way of identifying all the different influences, interest levels and concerns. It helps to set out clear engagement priorities. It is the start of an effective stakeholder engagement process – including a mechanism for addressing and resolving grievances – that can be clearly communicated and followed.

At its simplest level, this is really about building sound relationships based on trust. It generally works to be open and transparent, especially about what you can and cannot change. The geology of the site is fixed and the options for access are likely to be limited, but there can be many options for the design of the coal mine. Involving communities within the stakeholder engagement process can provide the opportunity to comment and even change the mine design based on particular requirements.

To assist mining companies with transparent and accountable reporting practices there is a developing list of environmental and social guidance policies, protocols and practices. The International Finance Corp. (IFC) implemented revised performance standards (IFC PS) in January 2012, which have become the most widely accepted framework. They define clients’ responsibilities for managing their environmental and social risks, while ensuring sustainable development and communities are right at the top of the agenda. The equator principles are based on the IFC PS (and the IFC environmental, health and safety guidelines). As of 4 June 2013, 79 adopting financial institutions in 35 countries have officially adopted the equator principles, covering over 70% of international project finance debt in emerging markets. This reinforces the influence of these standards on global project financing.

New on the list is the new Bettercoal Code. A global, not-for-profit initiative established by a group of major utilities, it sets out the ethical, social and environmental principles and provisions that Bettercoal members expect. It promotes the continuous improvement of corporate responsibility in the coal supply chain, with a specific focus on the mines themselves.

Recruitment strategy can play a vital role in building community relations, avoiding some of the disasters seen in the past, where thousands of people were brought in to work a new mine and then all moved out again after its closure – completely against the principles of sustainability.

Starting with a skills audit of the local population makes sense. Local apprenticeships to train people for jobs on the mine can give them transferable skills in the future. Well motivated and compensated local labour will generally be more reliable and less likely to move away mid-programme than expensive expat labour.

An effective long-term employment strategy should also extend to the sustainable closure and restoration of the mining area. Quite apart from the physical side, part of the planning can usefully include building relationships with local colleges and universities to help develop the skills that the local community needs and avoid a skills drain as young people move away. The most enlightened schemes can go beyond funding initiatives to active involvement in training and development.

The key risk is that of negative social opinion or perception; however, it should be possible with the right planning and attitude to turn it into an advantage. If the key influencers in a community are on side, it can spread a message quickly in an easily accessible way.

Engaging well with local communities can be one of the most critical factors in securing finance, gaining the support of regulators and government representatives, maintaining good labour relations, keeping costs and insurance premiums under control, making sure morale and productivity stay high and establishing a good strategic position to open new sites in future. Building trust is the key to managing these relationships throughout the project lifecycle and beyond.

This article first appeared in the October issue of World Coal.

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